NEWSLETTER MAY 2015 Significant Events MAY 2015

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1 N E W S L E T T E R M AY Starlight U.S. Multi-Family (No. 4) Core Fund (the Fund ) is listed on the TSX Venture Exchange. The Fund is sponsored and asset managed by Starlight Investments Ltd. (the Manager ). The Fund s mandate is to invest in recently constructed, stabilized, Class A multi-family properties in Florida and the Southeastern United States. The Fund s primary objective is to generate stable monthly cash distributions for its unitholders and enhance the value of its assets through active management. Grand Cypress Pure Living Heathrow Significant Events Through an initial public offering of Units, the Fund raised a total of CDN$64.7 million in April With the proceeds of this offering, the Fund successfully completed the acquisition of interests in a portfolio of two Class A multi-family properties located in Orlando and Tampa, Florida (the Initial Portfolio ) comprising 688 multi-family residential units for an aggregate purchase price of approximately US$96.9 million. In connection with acquisition of the Initial Portfolio, the Fund deployed over half of the gross proceeds from its initial public offering. The Fund indirectly acquired a 100% interest in Verano Apartments, a property located 37 kilometres south of downtown Orlando at 2200 Villa Verano Way, Kissimmee, Florida in a rapidly growing suburb of Orlando. The property is comprised of 384 units in 18 predominantly three-story apartment buildings on a acre site ranging in size from one bedroom to three bedrooms and includes a central clubhouse that contains numerous modern amenities including a resort-style swimming pool with sundeck overlooking a pond as well as a gourmet outdoor kitchen and car care centre. The property has a state-of-theart fitness centre, child room with expansive playground, dog park and business centre. Units feature modern interior finishes such as black appliances, electric glass top range/oven, granite bar countertops, upgraded lighting and garden-style tubs. M AY

2 The Fund also indirectly acquired a 100% interest in Grand Cypress, a property located 31 kilometres north of downtown Tampa at 1901 Cypress Preserve Drive, Lutz, Florida in a rapidly growing suburb of Tampa. The property is comprised of 304 apartment units in 20 two-storey buildings and a central clubhouse located on a acre site ranging in size from one bedroom to three bedrooms and includes a central clubhouse that contains modern amenities including a state-of-the-art 24 hour fitness and aerobic centre, media room, cyber café, children s game room and business centre. The property has a resort-style swimming pool with beach entry, outdoor sports bar with entertainment area, grilling area, car care centre, fully equipped children s playground and forested wetlands, lake and lush green areas. Units feature modern interior finishes such as stainless steel and black appliances, granite countertops, upgraded lighting and designer wood cabinets with brushed nickel hardware. Acquisitions The Fund s most recent acquisition was the purchase of a Pure Living Heathrow. This property is a 252 unit, garden style, Class A, apartment complex, completed in 2009 and located in a rapidly growing community in Heathrow, Florida. The transaction was completed on May 7, Pure Living Heathrow consists of 13, two and three-storey walk-up buildings on a acre site comprised of one, two and three bedroom units. Each apartment unit at Pure Living features condo quality finishes that include nine- and ten-foot ceilings, granite countertops, Italian tile flooring, stainless steel appliances, and smoke glass privacy walls. Amenities at Pure Living include a large clubhouse, a separate rooftop party room with five 42 TVs, a fitness centre and a business centre. Exterior features include a zero edge swimming pool, an infinity edge champagne spa, barbeque grills, a dog park, a putting green and a sand volleyball court. Our investments are summarized in the table below: Date Acquisition Description Number of Units Date Constructed Property Location April 10, 2015 Verano Apartments and Grand Cypress Kissimmee and Tampa, FL May 7, 2015 Pure Living Heathrow Heathrow, FL Monthly Unitholder Distributions On May 15, 2015, the first monthly distribution on each class of Units was declared. Cash distributions on the outstanding Class A Units, Class C Units, Class D Units, Class E, Class F Units and Class U Units of C$ per unit and on Class H Units of $ per unit were declared for the month of May 2015 which will be payable in June The distribution amounts are based on the proceeds of the Fund s initial public offering, and represent at least a 7% annualized yield on each unit class s issue price of $10 per unit except for Class H units which represent a 5% annualized yield. 2

3 Distribution Calculation The distributions in respect of the Class A, C, D, E, F, H and U Units were determined in U.S. dollars and converted into Canadian dollars. The distribution amounts are based on the proceeds of the Fund s initial public offering which have deployed to date. U.S. Multi-Family Market Trends National Occupancy Levels and Home Ownership Rates According to the U.S. Bureau of Labor Statistics (the USBL ), the U.S. unemployment rate declined further in March 2015 to 5.5%. The 20 to 34 year old cohort has continued to fuel apartment rental demand for new product, with U.S. home ownership now at a twenty year low. According to the U.S. Census Bureau, home ownership continued to decline and was down by 0.3% to 63.7% in the first quarter of Apartment occupancy rates and rental growth continue to be strong with MPF Research ( MPF ) reporting first quarter 2015 U.S. apartment occupancy of 95.5% for the 100 largest markets. Annual rent growth increased in the first quarter 2015 across these markets by 0.7% and 4.6% year over year. Orlando Market Trends Employment Growth According to the USBL, the Orlando Metropolitan Area gained 50,200 jobs from March 2014 to March 2015, an increase of 4.6% placing it first among major metropolitan centres in the U.S.. The unemployment rate in March was 5.1% in Orlando, or 40 basis points below the national average of 5.5%. Occupancy and Rental Growth According to MPF, first quarter 2015 occupancy levels for Orlando were 95.9%, up 0.3% from fourth quarter of Rental growth for the quarter was 0.8% with year-over-year rent growth of 4.7%. MPF s one year forecast for Orlando is to remain relatively stable at an occupancy level of 95.5%, with rental growth of 3.9%. Orlando Submarkets According to MPF, the two Orlando submarkets where the Fund has invested - Kissimmee/Osceola County and Sanford/Lake Mary - both remained strong in the first quarter of Kissimmee/Osceola County s occupancy rate was 96.3%, up 0.1% from the fourth quarter of 2014, with annual rent growth of 3.8%. Sanford/Lake Mary s occupancy rate was 95.7%, unchanged from the fourth quarter of 2014, with annual rent growth of 5.8%. Tampa Market Trends Employment Growth According to the USBL, the Tampa Metropolitan Area gained 34,500 jobs from March 2014 to March 2015; an increase of 2.9%. According to the USBL, the unemployment rate in Tampa in March 2015 was 5.3%, or 20 basis points below the national average of 5.5%. 3

4 Occupancy and Rental Growth According to MPF, first quarter 2015 occupancy levels in Tampa increased 0.4% to 95.2%. Annual rental growth increased to 5.1% during the quarter. MPF s one-year forecast for Tampa is for overall occupancy of 94.7%, with rental growth of 3.2%. Tampa Submarkets According to MPF, the Tampa submarket where the Fund has invested - New Tampa/East Pasco County - remained strong in the first quarter of New Tampa/East Pasco County s occupancy rate was 95.0%, down 0.5% from the fourth quarter 2014, with annual rental growth of 6.1%. MPF expects the occupancy rate in New Tampa/East Pasco County to drop slightly over the next year to 94.8% due to new construction in the submarket. Investment Market Update Commercial real estate investment demand continues to be strong nationally, as well as in both Florida and the Southeastern United States. Capitalization rates for suburban, Class A, multi-family product in Orlando and Tampa are approximately 4.75% to 5.25%, depending on the quality and location of the apartment community. 10 Year U.S. Treasury bonds are currently yielding 2.11%, having dropped by approximately 90 basis points off recent peak levels. Lender spreads remain very competitive and all-in rates continue to remain low versus historical levels with debt readily available at lower leverage levels. Property Improvements Beginning in the second quarter of this year, Verano Apartments will undergo renovations to the clubhouse, pool, pool patio and outdoor kitchen, as well as enhancements to the property landscaping. We expect this work to be complete by the end of third quarter. A dog park is being added at Grand Cypress as a resident amenity and we expect this to be project to be completed in the second quarter. There are currently no planned improvements at Pure Living Heathrow. Property Management and Rental Rates Update Property Management The Fund benefits from the local real estate expertise and market intelligence of best-in-class property managers. Pinnacle Family of Companies, the fourth largest third-party, multi-family property manager in the U.S. provides property management for Verano Apartments and Pure Living Heathrow. The Altman Companies, a large, third-party manager in the U.S. with local market expertise and experience provides property management for Grand Cypress. Rental Rates Given the strong occupancy levels at the Fund s properties, the Manager is aggressively increasing rental rates on both new and renewal leases, while concessions are being curtailed. Only limited concessions are currently being offered on new and renewal leases at any of the Fund s properties. Implementation of Yield Management Software The Manager has implemented yield management software at Verano and Grand Cypress and is the process of implementing the software at Pure Living Heathrow. This software provides new pricing on a daily basis, optimizing asking rents and renewal rents in real time, based on supply and demand for different unit types. This rental rate optimization system is similar to those employed by the hotel and airline industries to manage their room rates and flight prices. 4

5 Ancillary Services Update The Manager has rolled out Valet Waste, a door-to-door trash pick-up service at Verano Apartments. This service was already in place at Grand Cypress and Pure Living. This initiative will result in significant increases to ancillary revenue at Verano. Outlook The Manager believes that its properties will continue to benefit from increasing demand for residential rental accommodation, reflecting demographic trends and the affordability and desirability of renting in comparison to home ownership. In addition, the supply of comparable, multi-unit residential rental properties is limited in the markets in which the Fund operates. The performance of the U.S. economy and local markets continues to support improved multi-family real estate fundamentals. The Manager is actively seeking out acquisition opportunities and expects the Fund to be fully deployed in the third quarter of The Fund s properties are performing well with strong occupancy, rental growth and net operating income growth. We expect to continue to produce consistent investment returns for unitholders. For more information, please contact: Evan Kirsh, President Starlight U.S. Multi-Family (No. 4) Core Fund Bloor St. West, West Tower, Toronto, ON M8X 2X2 Phone (647) ekirsh@starlightus.com 5

6 DISCLAIMER This Newsletter is intended for informational purposes only and is not, and should not be construed as, an offer to sell or a solicitation of an offer to buy any securities of the Fund, or investment advice to any individual. Particular investments should be evaluated relative to each individual s circumstances and individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Past performance may not be repeated and nothing in this Newsletter should be construed as an indication of future values of the Fund or future returns on any investment in the Fund. This Newsletter is not intended for distribution in any jurisdiction that would require the filing of a prospectus, registration statement, offering memorandum or similar document under the applicable laws of such jurisdiction or would result in the Fund having any reporting or other obligation in such jurisdiction. Accordingly, neither the Fund nor the Manager has done anything that would permit the possession or distribution of this Newsletter in any jurisdiction where action for that purpose is required. This Newsletter contains statements that may constitute forward-looking information within the meaning of Canadian securities laws and which reflect current expectations of the Fund s management regarding future events, including statements concerning: the payment of distributions; the value of the Fund s properties; the trading price of Units; national and local real estate market conditions and economic variables; rental rates; occupancy rates; currency exchange rates; the potential results from yield management software; and type, timing and cost of capital improvements. The forward-looking statements involve risks and uncertainties, including those discussed in the Fund s materials filed with the Canadian securities regulatory authorities from time to time at which could cause the actual results and performance of the Fund to differ materially from the forward-looking statements contained in this Newsletter. Those risks and uncertainties include, among other things, risks related to: the reliance on the Manager; the experience of the Fund s officers and directors; real estate ownership; substitutes for residential real estate rental suites; government regulation; financing; interest rate fluctuations; reliance on property management; competition for real property tenants; fluctuations in capitalization rates; U.S. market factors; and currency exchange rates. Information contained in forward-looking information is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management s perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the inventory of multi-family real estate properties; the availability of mortgage financing and current interest rates; the extent of competition between properties; the population of multi-family real estate market participants; assumptions about the markets in which the Fund intends to or does operate; the ability of the Manager to manage and operate the properties; the global and North American economic environment; foreign currency exchange rates; and governmental regulations or tax laws. Readers are cautioned against placing undue reliance on forward-looking statements. Except as required by applicable Canadian securities laws, neither the Fund nor the Manager undertakes any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. This newsletter contains statistical data, market research and industry forecasts that were obtained from government and industry publications and reports or are based on estimates derived from such publications and reports and the Manager s knowledge of, and experience in, the markets in which the Fund operates. Actual outcomes may vary materially from those forecast in such publications or reports. While the Fund and its Manager believe this data to be reliable, market and industry data cannot be verified due to limits on the availability and reliability of data inputs and other limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy, currency and completeness of this information cannot be guaranteed. 6